David impressed me with his definition of our job as a “borrower’s advocate”. He suggested that we would do well to align ourselves squarely with the borrowers. While he never suggested that our lender partners are the enemies, his message was quite clear. Originators need to help borrowers FIRST. Banks are so puckered today that borrowers need a guide to help them interpret loan offerings, argue their case for approval, and secure the best terms possible. When mortgage brokers fully embrace that concept, we will have earned the public’s trust. Here’s David on Mortgage Sales Blog:

For some reason, originators get offended when a potential client wants to know detailed information about the terms of their new loan prior to completing a full application.

The mortgage rate question is a buying sign, not a shopping sign.

They ask about rates because all of the advertising in the news and media leads borrowers to believe that mortgage rates are a consistent means of measuring one broker or banker over another.

In reality, most borrowers have more important criteria for selecting a loan officer to do business with, like whether or not they can trust you.

The rate question is basically a qualifier. They’re not shopping rates, they are shopping you. It gives the borrower some insight into you level of transparency and ability to communicate on their terms.

How you answer the rate question will ultimately determine your success or failure at earning a borrower’s business.

Think about it, if a potential client is willing to speak with you about rates, then they are obviously interested in opening a dialogue about how your mortgage options will impact their financial goals.

What would happen if we encouraged borrowers to apply for the terms they wanted? I remember when I started in this business. I used to ask customers what terms they hoped for and put it on the loan application. I started with their best expectation and explained that we would put it on paper and run it by an underwriter and pricing manager. We used to do that before automated underwriting systems were implemented and the business was easier. Lenders sold us on the “instant approval” power but transferred the adversarial relationship from them to the originator; AUS positioned the originator as the bad guy. Borrowers see the loan application as a “closing technique” while originators know that a loan application is merely a starting point. A common goal then, might just bridge the trust gap so that both borrower and originator “get what they want”.

David continued by reminding us that while borrowers like to “shop”, only one in seven actually select a mortgage offering based upon the “best” terms. We all know that it is mathematically impossible to receive the “best” terms so it is clear that borrowers are shopping originators rather than mortgages. Putting the borrower in control and giving her good explanations for the underwriting and pricing decisions helps to build the trust borrowers so desperately want.

Zillow Mortgage Marketplace attempts this with their anonymous loan requests. Originators are scared to offer the best terms for fear of the anonymous “ratings system”. The result is an electronic quote fest that rarely results in the correct loan terms for the client. How do I know this? I’ve watched Zillow customers deliberately choose more expensive loans because their office buddies were “coaching” them. Adversarial relationships, whether industry encouraged or consumer initiated rarely result in the best solution.

Jeff Corbett’s upfront fee negotiation falls short as well. His Ratespeed product encourages borrowers to grind originator compensation to the point where only the least talented originators will accept the engagement. Lesser talented originators often compromuse suitablity for expedience and that results in an inappropriate loan solution.

I like the old-school concept of a “customer’s man” for our industry. David Bartels suggested that “hope” is very much a strategy for borrowers today. Combining the best features of ZMM (open quoting) and Ratespeed (transparent fee disclosure), with the customer advocacy Bartels pleaded for today, offers a relationship that allows both originators and borrowers to “get into a relationship” and start solving problems.

Customers are reasonable; they understand that we need to be compensated. Fighting for customers is how we should earn our fees. Lender defense doesn’t solve the problems of the people who ultimately pay our bills. Borrower advocacy does.

Well said and very compelling. Question for you, how do you “mesh” that type of thinking with the fact that many of the big lenders are getting away from wholesale lending and I would dare say that many of the originators are moving from working as brokers to working as employees of a bank?

I’d like your thoughts on that.

Tom

Dave January 23rd, 2009
7:52 am

Thankyou Brian!
You are correct about “a relationship” and problem solving is where originators can do the most good. It is also an area the big banks will never enter, they will always opt for advertising and PR driven contrivances that are lightsome at best, intended to fool the public at worst.
Big banks will never spend the money to hire and retain the talent needed to execute that strategy. They will, however, spend large sums to present an imitation of your ideas. Thus it will still come around to the most effective way to reach customers is using originators.
Dave

“how do you “mesh” that type of thinking with the fact that many of the big lenders are getting away from wholesale lending”

That’s a good question, Tom. The wholesale channel, while beaten up, is healthy. I thought we’d see a lot of little correspondent lenders pop up last year to fill the vacuum that existed; I wasn’t disappointed. It’s like 1998 all over again.

With high demand and 3 out of 4 funded loans being backed by the gov’t, wholesale mortgage banking becomes quite lucrative for the ambitious entrepreneur

Okay, but you didn’t answer my question. Looking not at organizations, but look at the people who write loans at banks (people like me). I believe 100% in what your talking about, but how do lenders (people, not banks) who work for banks achieve that while being an employee of a bank?

The idea is to communicate to the borrower that your role in the relationship is to walk them through the maze of mortgage options, allow them to shop without shopping and make a good decision based on all the information.

The borrower wants to feel like they are working with a trusted advocate. Someone whose focus is to make sure they have all the information they need to make the best decision for them and their family.

Thanks. That makes sense and that’s what I’ve spent the last 20 years doing at 5 different banks over the time. I just wanted to get some additional insights into how to balance the role of an employee who has an obligation to try to “sell” their products and the advocate type of a person that you and Brian and I try to be. There’s a bit of a dichotomy between those two roles some times, isn’t there?

Brian,
I first off wanted to say it was a pleasure in speaking with you yesterday, and what a great example you are of a true mortgage originator. I enjoy your blogs, and appreciate your time,energy and efforts in writing for us.

“His Ratespeed product encourages borrowers to grind originator compensation to the point where only the least talented originators will accept the engagement. Lesser talented originators often compromise suitablity for expedience and that results in an inappropriate loan solution.”

A product/service like Ratespeed primarily mandates that originators disclose exactly what a given borrowers credit, income, and asset risk based pricing scenario costs or pays for a given rate and program.

Secondarily it mandates that an originator disclose their fee up front, whatever they determine that fee should be…lesser talented originators will fail miserably using such a tool, not because they compromised suitability for expedience, rather because they can’t properly justify their self professed value.

Selling expertise in loan suitability to a borrower in today’s market is of diminishing value. Gone are the days of hundreds of lenders offering thousands of programs, offering the misaligned and undisclosed financial kickbacks (or pitchforks) that all parties started sticking each other with. It goes far deeper than this, but you get the point.

Customer advocacy has always been the ‘fiduciary duty’ of the mortgage broker…I find it bemusing that this practice has to be redefined (and resold)…again.

The challenge is selling a cozy vertical ‘relationship’ in what is a purely transactional environment. A challenge overcome by: Being Honest.

You’re a good guy Brian, call me when you want to go on tour together…we’d knock em dead

The first two have already shown that they’ll do what’s in their best interest at the expense of the consumer, Jeff so I’m pretty certain I wouldn’t have much of an impact there.

Jeff, I know your heart’s in the right place but the anonymous internet lead generation systems are how we got INTO this mess. Encouraging consumers to “shop” loan terms is a great sound bite. When that loan is misaligned with the borrower’s best interest though, it resets our industry to 2004.

Advocating a strategy, that condemns us to repeat the same mistakes, is not something our industry can afford. I think it better to educate our folks about how to give the borrower what they need not just facilitate what they think they want.

Brian, this is very true and how I hope my clients have viewed my business practice. It’s also why I have issues with the Zillow and other “pick your rate” vs pick your mortgage professional set-ups. It automatically tells consumers that all you’re worth is the rate and diminishes any other value a true mortgage professional really has.

“The first two have already shown that they’ll do what’s in their best interest at the expense of the consumer,”

Sad yet true…my answer was wholly tongue in cheek…

“Jeff, I know your heart’s in the right place but the anonymous internet lead generation systems are how we got INTO this mess. Encouraging consumers to “shop” loan terms is a great sound bite. When that loan is misaligned with the borrower’s best interest though, it resets our industry to 2004.”

I beg to differ. Can you get a loan approved today if DU or LP decline it? In 2004, you could.

AU’s help insure a loan is in a borrowers best interest by saying NO, YOU DO NOT QUALIFY, PERIOD…if the borrowers credit and financial situation dont line up with approval conditions.

People, not AU’s, put borrowers in loans they had no business being in.
If a borrower had a DTI that was a over a programs stated ceiling, pay another .25% in margin and bingo..approval. Credit score below a programs guidelines? NP, get your AE to sign off.

(As an aside, I think the industry has gotten too tight, declining some borrowers and make sense loans for the wrong reasons.)

Education has become common sense, matter of fact as program choice has narrowed substantially…lessening the chance of ‘borrower – loan misalignment’.

Back to the point of your post, which is about (re-re)re-establishing the mortgage professional as a trusted adviser, a consumer advocate.

How do you do that?

I’d sell the honesty of simple math. Consumers aren’t looking for a friend, they’re looking to save money. Don’t insult them with empty value propositions, gain their trust and their business.

As stated, I find it bemusing that there are still seminars selling value propositions like this…but that’s just me.

Finally, the #1 thing that can be done to establish more trust in the mortgage industry is setting the exact same disclosure standards for both brokers and bankers. The fact that there are two different sets of rules depending on your designation fundamentally undermines the entire industry and the good professionals left in it…

“AU’s help insure a loan is in a borrowers best interest by saying NO, YOU DO NOT QUALIFY, PERIOD…if the borrowers credit and financial situation dont line up with approval conditions.”

Hmm, my experience has been the opposite at times. The deal doesn’t really make sense at a 62% back end debt ratio, but hey, LP bought it! We never had that problem 10 years ago.

“People, not AU’s, put borrowers in loans they had no business being in. If a borrower had a DTI that was a over a programs stated ceiling, pay another .25% in margin and bingo..approval. Credit score below a programs guidelines? NP, get your AE to sign off.”

Once again, I’m not really sure that’s right. My experience has shown that people started “playing” to what they could get done with the AU systems, not what really made sense for the customer. That’s part of the problem we’re dealing with now……

“It automatically tells consumers that all you’re worth is the rate and diminishes any other value a true mortgage professional really has.”

Worse than that, Rhonda, the bots diminish the value of the customer by reducing them to an anonymous borrower. A professional mortgage planner looks at more than the 3Cs. Equity management then becomes risk management and college/retirement planning.

“Now a question, what can we as a collective group of motivated professionals do to reclaim the trust that has been lost?”

It’s already been reclaimed, Tom. This seminar had only 100 people there vs. the 250-300 it used to get. David surveyed the room and found that over half the grey-haired originators had ten plus years of experience. The market has purged the bad apples for us.

We need to continue to old-school practice of borrower’s advocacy. 85% of these folks trust us to advise them properly. I can’t save everyone so I’ll focus on that large percentage of borrowers.

“I’d sell the honesty of simple math. Consumers aren’t looking for a friend, they’re looking to save money. Don’t insult them with empty value propositions, gain their trust and their business.”

Jeff, you couldn’t be more wrong. Sit across the kitchen table from a family struggling to make payments in an equity evaporating neighborhood. They need a friend, an advocate, a warrior who will fight for their cause.

“I beg to differ. Can you get a loan approved today if DU or LP decline it?”

Of course I can.

“Education has become common sense, matter of fact as program choice has narrowed substantially…lessening the chance of ‘borrower – loan misalignment’.”

This is a common mistake, Jeff. Most people think that the narrowing of product options reduces the need for planning expertise. It actually heightens the need for an experienced mortgage planning professional.

Jeff, you’re saying all the things the “tech guys” say and I get your argument. The problem with the “tech guys” is that you don’t deal with PEOPLE. People who think and sometimes act irrationally out of fear or greed. It’s the gal who’s willing to stand out on the cliff with a friend, while the wind is blowing hard, that talks her friend out of jumping. If “common sense” (as her friend might perceive it)prevailed, the friend might just jump.

“Don’t insult them with empty value propositions, gain their trust and their business”

Rates sometimes change a few times a day. If I earn the business of a client based on the rate that they saw on my web site this morning, then what happens when they come to the office tomorrow to sign initial disclosures and discuss their complete financial strategy? All I’m doing is setting myself up for failure.

I believe in transparency, which is why I would be interested in figuring out how to integrate a program like RatesSpeed or RateWindow into my overall marketing / client communication agenda.

However, borrowers end up paying more in the end for “Transparency” without representation.

I’ve had potential clients and real estate agents tell me what rate or payment they wanted based on some advertisement they found online. In some cases, I gave it to them, but only after a thorough discussion and written explanation of their options.

Either way, I don’t see technology providing the full service that a client needs to make an educated decision.

Allowing borrowers to choose their rates and terms based on “simple math” is one major reason half of the listings in my town are bank owned.

I’m really not a tech guy Brian, I’m a former owner of a mortgage company who speaks from the feedback I received from over 1000 customer surveys regarding the mortgage industry after they closed a loan with us.

Being efficient has nothing to do with offering sage advice. ‘Mortgage Planning’ or the financial education behind acquiring the proper mortgage, was the vanguard of the business.

I found that educating a consumer regarding all aspects of the industry and giving them transparent choices up front, then with efficiency, converted shoppers to clients at a ridiculuosly high conversion and satisfaction rate.

We never had to convince, tell/sell customers that we were their ‘advocate’ it was obvious from our words and actions at the outset.

No widget or system is going to replace the experienced, ethical professional, but the ones who use the proper tools and systems can leverage themselves into a lot of marketshare in this industry going forward…they will be the ones who come out standing on the other side of this major economic correction.

‘Just run it’ was the common term because they ‘just did it’, regardless if the loan made sense for the consumer…at this point its up the professional to say this loan may not be a good idea for your financial situation, instead the prevailing thought was: ‘Hey I got them a loan and I got paid’. Around 2002 until 2007 ‘mortgage originators’ were annointed with the ability to give money away for real estate…they granted and sold the ‘American Dream’ down consumers patriotic hearts, because borrowing and buying, especially real debt, was safe and ‘good for the economy’.

There are different problems today than the recent past, akin to Triage for an entire industry…but in the end its still all about transparent education and efficiency.

While I appreciate the discussion this post has created, I want to make sure that people do not think the seminar Greg Frost and I do has anything to do with Ratespeed. I never even heard of the company before I read it in this thread and do not recommend or endorse the product.

I do not believe in technology as a magic bullet for originators or borrowers. I do believe that it is in the industry’s best interest to make sure we walk the borrower through the maze of mortgage options and help them make the best decision for them and their families.

I do not believe that borrowers are shopping rate as much as I believe they are looking for someone they can trust to help them with the biggest financial transaction they have probably ever made.

Borrowers want to know:

1) Can I trust you?
2) Are you committed to excellence?
3) Do you care about me?

There are lots of strategies that help you achieve these objectives. I happen to be a proponent of written options presented in a way that helps the borrolwer understand their options.

If you agree with me that a confused mind says no, then written options properly explained answers questions and relieves borrower anxiety to a level that allows them to feel comfortable choosing you. Once they choose you, the rate is the rate. Seems to me, this should be every originators objective.

I love the Tim Braheem quote Greg Frost uses in the seminar. “The person with the most relationships wins”.

People have a tendency to trust who they like and like who they trust. What process are you using to establish trust in your relationship with borrowers?

“People have a tendency to trust who they like and like who they trust. What process are you using to establish trust in your relationship with borrowers?”

That is an excellent question and the heart of the matter on what needs to be done…..

“We need to continue to old-school practice of borrower’s advocacy. 85% of these folks trust us to advise them properly. I can’t save everyone so I’ll focus on that large percentage of borrowers.”

Brian – very well said. There’s a certain percentage of people who will only be driven by a rate. Those we can just give them our rate and go on. It’s the ones who want and need the advocacy and counsel that we can help.

“It’s already been reclaimed, Tom. This seminar had only 100 people there vs. the 250-300 it used to get. David surveyed the room and found that over half the grey-haired originators had ten plus years of experience. The market has purged the bad apples for us.”

I think it’s starting, but in my market, it’s not a matter of the “purge” being close to done yet. I think there is the matter of getting rid of the bad apples and then also getting people to trust those who are left. Not one in the same thing…..

I’m not promoting a product, I’m promoting a philosophy and business strategy that promotes relationships with the strongest of bonds. Technology is simply a catalyst.

Consumers are shopping rate and price, that’s what consumers do. Consumers expect excellence and buy when they trust. Trying to change these patterns or convince them that they shouldn’t shop rate is a grind at best. Educate consumers on how to properly shop a rate (how and why they can change multiple times daily etc etc), then ironically enough (or not), they stop shopping because they begin to trust you, feel that you care about them, believe you are committed to excellence and thus commit to you.

Again, I’ve found that once consumers understand exactly what they are buying, why they are buying it and how much they are paying for it, they feel real comfortable making a choice.

The process I recommend is disclosing all aspects of a mortgage, as well as the mortgage process…a confused mind does say no, so why not make all aspects of the relationship crystal clear?

As a former Loan ToolBox client and subscriber of many of the other seminar track messages and products for years, the single largest positive influence on my business was becoming radically transparent with how the mortgage industry worked and acting as a sage tour guide. I stopped preaching to the consumer, started listening to what they wanted to know, and gave it to them.

I realize giving consumers direct access to rates, pricing and program information scares the hell out of the status-quo in the mortgage industry and is completely counter to whats been taught for a generation, similar to the real estate agent who scoffed at the idea of open property listings, but the informations ubiquity is inevitable.

“I realize giving consumers direct access to rates, pricing and program information scares the hell out of the status-quo in the mortgage industry”

It doesn’t scare anyone, Jeff. The misapplications of those rate sheets are what scares me. If originators can’t comprehend the intentional opacity of today’s rate sheets, how will a consumer?

Access to rate sheets does not a deal make. Let me give you an example. A less experienced originator sees a cashout refi for a sub-680 borrower and elects to use FHA. A more experienced originator recognizes:

a) improvements to the home
b) an open collection account on the credit report.

The more experienced originator obtains proof of the paid account, orders a Rapid Rescore (to raise the score above the hurdle), and requests receipts for the home improvement. Armed with those papers, the more experienced originator secures a rate/term conforming refi and saves the borrower some $6000 in fees.

Will the low-cost provider, relying upon the internet lead who has “access” the wholesale sheets, be sufficiently motivated to do the extra work? Of course not; he’ll just shrug his shoulders and stick the borrower with the extra charge claiming “it’s not his problem”.

Aspects of our relationship with a borrower are crystal clear in the disclosures we offer. It is the professional originator who reviews those disclosures with the borrower so that they comprehend the relationship.

“What process are you using to establish trust in your relationship with borrowers?”

Good question, David. Thanks for bringing the thread back on topic. I’ll answer that with an example of from one of my meetings, this morning:

I opened the discussion with the concept of advocacy and displayed four options, using average rates. We agreed that one was better than the other but that a low appraisal might require the inferior option as a back-up plan.

I also used “radical transparency” to DEFEND my fee by letting the borrowers see two rate sheets. What this did was inspire a “deer in the headlights” response.

I finally gave them a copy of my “mortgage rates report” to discuss a target rate with them.

Here’s what the result was:

1- We know exactly which program we want.
2- We know what a reasonable alternative is.
3- We know exactly how (and the amount) I’m to be compensated.
4- We know we’ll be watching rates (together) to execute a lock for them.

Needless to say, they chose me as their originator. When positioned as the “guy who helps them pry the bailout money from the banks”, I win every time.

Without debating the point strenuously, I think when given the choice to choose rate vs. a trusted originator with the intent of helping a borrower find the right loan, the borrower chooses trusted originator an overwhelming percentage of the time.

There is no single way to earn a borrowers trust and my opinion is only one of many I know that work well.

You have no control over it, so why not just put it all on the table, cards up, and take it out of negotiation, instead of trying to get a borrower to believe its not important or otherwise deflecting their attention?

The most interesting question here is posed by the banker, Tom. Tom has hit upon a fantastic dilemma. How does a professional with high duties owed to his/her client, balance that with the duties owed to his/her employer?

As the industry slowly steps away from being salespeople and steps toward being professionals, we’ll stop calling ourselves salespeople, and having sales seminars about how to earn more money and make more sales.

“we’ll stop calling ourselves salespeople, and having sales seminars about how to earn more money and make more sales”

Why would I ever want to stop calling myself a salesman? I’m very proud of my salesmanship skills. My salesmanship skills have persuaded underwriters to weigh common sense against puckered banks’ counterintuitive guidelines and improve a borrower’s and servicing bank’s position.

I hope we never stop having these seminars. The best practices taught at David’s seminar reinforced the widely-held belief that there is no substitute for ethical salesmanship. If you possess the innate ability to do well for your borrower, I submit that it is a responsibility, a duty perhaps, to better your salesmanship skills so that we save MORE borrowers from the unethical characters in this business.

It is noteworthy that only the folks who don’t originate are criticizing the “sales” profession. Face it, gang. The free market took care of the bad characters in mortgage origination. Those of us left standing, the professional mortgage salespeople, are here to clean up the mess; we’re doing a damned good job, one borrower at a time.

Licensing or education won’t cause the cream to rise to the top; the brutal reality of a shrinking and free market did. If you want to effect “change”, for the better of the consumer, focus your efforts on the thieves. The thieves are pretty much gone in the mortgage origination business; they all flocked to D.C. and the redecorated office suites of the gov’t-sponsored banks.

Jillayne, even as a title rep, I served my client over that of my employer. Did it cause conflict with my employer? You bet. But I made a choice and it’s the same one I’ll make over and over again.

It helps that I have (in title and mortgage) a volume of business large enough to where the employer “tolerates” me. (I’m not sure if tolerate is the best word to use here and I don’t want to paint the wrong picture). I will always serve my client first.

I have always felt that I’m a client of my employer. They’re lucky to have me…and I appreciate them too.

The idea that the borrower question about rates is a buying sign and not a shopping question is a welcome eye opener. Once you realize that as a mortgage consultant, as I am fully doing right now, will make you interact with your clients in a totally different manner. In a more professional manner. Excellent insight, I think.

As a real estate investment broker, doing business in multiple states, this thread has been more than interesting, it’s been entertaining in an informative way. In one sense I don’t have a dog in this ‘fight’, but since my clients don’t buy property for cash, I’m forced to at least pay serious attention. Duh.

This thread to me as been circular in nature, at least from my viewpoint. JeffX can indeed lead folks to lenders with exemplary skills, who will then exercise those skills. Where’s the problem?

The macro issue here is the marriage of 1.0 and 2.0, isn’t it?

Auto underwriting is like a gun, a lifesaver, life taker, or food provider depending upon it’s user’s goal. Brokering loans? Ditto. Work for a bank? Ditto.

Either you’re a hard working, highly skilled lender with integrity, or you’re not.

The common thread I am seeing is building a good relationship with trust and honesty. Its the only way to go…you’ll win some and lose some…mostly win, I believe. If your intent is good, your reputation is intact. You will also sleep better!

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